Danaos(DAC) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EPS for Q4 2020 of $2.29 per share, an increase from $2.01 per share in Q4 2019, resulting in an adjusted net income of $47.8 million compared to $38 million in the prior year [14] - Adjusted EBITDA increased by 6.3% to $83 million in Q4 2020 from $78.1 million in Q4 2019, reflecting improved market fundamentals [19] - Operating revenues rose by $9.4 million to $119.6 million in Q4 2020, driven by higher charter rates and the addition of four vessels to the fleet [15] Business Line Data and Key Metrics Changes - The company completed 27 recharterings over the past three months at rates between 2x and 3x the rates of expiring charters, covering 91% of 2021 operating days [10] - The contract backlog currently stands at $1.2 billion, with contract revenues for 2021 expected to be $543 million, already $81 million higher than total revenues for 2020 [22] Market Data and Key Metrics Changes - The charter market has strengthened significantly, with decade-high charter rates across almost all vessel types due to a resurgence in demand and low vessel supply [6][7] - The company noted that the current order book for new vessels is at historically low levels, suggesting moderate supply growth in the coming years [7] Company Strategy and Development Direction - The company aims to optimize its capital structure by balancing bonds and bank debt, with a focus on reducing borrowing costs and maintaining flexibility for future growth opportunities [28] - Management is cautious about entering the S&P market due to high vessel prices and prefers to build cash reserves for future strategic moves [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the sustainability of the current market strength, indicating that demand continues to outpace supply [26] - The company expects revenue in 2021 to exceed 2020 revenue by at least $100 million, driven by new contracted charters at significantly higher rates [10] Other Important Information - The company successfully completed a $300 million bond offering, which was over 3x oversubscribed, to refinance existing credit facilities and strengthen its balance sheet [12] - The value of the company's bond holdings in ZIM and HMM increased to approximately $63 million, and the value of its shares in ZIM exceeded $200 million [11][21] Q&A Session Summary Question: What is the outlook for the chartering market post-Chinese New Year? - Management indicated that the market is still strengthening, with new fixtures being at higher levels than previous ones, and expressed optimism for continued strength in 2021 [26] Question: Is it an attractive opportunity to be active in the S&P market in 2021? - Management stated that they do not prefer to chase the market and will focus on cash reserves instead of overpaying for vessels [27] Question: How is the company thinking about balancing bonds with bank debt? - Management noted that bond capital is becoming harder to find, and they aim to lower borrowing costs through successful bond issuance while maintaining a mix of secured and unsecured debt [28][29] Question: What are the plans regarding dividends? - Management indicated that the Board will discuss dividends after completing the financial transaction expected in April, with a decision to be made at the next earnings call [31] Question: What is the company's strategy regarding newbuildings and growth? - Management emphasized a cautious approach to growth, focusing on maintaining a strong balance sheet and being selective about investments, particularly in the context of environmental regulations [41][44]